The Supreme Court order quashing a Reserve Bank of India circular on resolving bad debt will provide relief to power companies and lenders as well as flexibility to restructure debts but will slowdown bankruptcy proceedings, experts said Tuesday.
The Supreme Court on Tuesday quashed RBI's February 12 circular, which prescribed rules for recognising one-day defaults by large corporates and initiating insolvency action as a remedy.
Vishrov Mukerjee, Partner, J Sagar Associates said after the Supreme Court judgment, the RBI may have to issue revised guidelines/circulars for the restructuring of stressed assets.
"There is also a question mark over existing processes which may have been completed/nearing completion," he said. "However, with the threat of IBC proceedings mitigated, it will give some breathing space to power companies and lenders as well as flexibility to restructure debts in a manner which ensures continuity and value maximization for lenders as well as power companies."